Analysis of Income tax deduction u/s 80IB

Individuals filing online ITR are well aware of the fact that when the income tax act was framed, it not only included the conditions and provisions of applying income tax on the Indian citizens but also defined the conditions and the sections under which an individual or an organisation could claim deduction in the amount of income tax levied on him.

Analysis of Income tax deduction.

One such section is 80IB under which the deductions are claimed by a small scale industry and they remain valid for 10years for the claimif they fulfil certain conditions in the first year. This section came in to light with the case of Commissioner of income tax Vs. M/s Sunder Forging (Punjab & Haryana High Court), in which the assesse was a SSI from the A. Y 2002-03 to 2005-06 successfully registered under the value added tax act and had submitted the application form for service tax registration and then it ceased to be so in the later year. It further qualified the status of SSI after few years and again filed a claim under 80IB including the years for which it was not registered as SSI.

The revenue department marked the assesse of being ineligible touse deductions u/s 80IB while filling income tax return online or offline for the years in which the organization was stripped off the tag of a Small Scale industry. The CIT office was of the view that the company has to fulfill the mandatory conditions for all 10years for seeking deduction under section 80IB.

The assesse on the was of the view that it should not be denied the deductions u/s 80IB as  the industry stabilized on an earlier time than expected , due to which it made more profit ,thus more investment and hence ran out of its certification as a SSI.

The court did a fair study of the case and also referred to historical evidence of the judgment in the case of Ace Multi Axes Systems Ltd vs. DCIT(2014) 367 ITR 266 (kar). It held the claim of M/s Sunder Forging as correct and valid on grounds that the income tax act  of India clearly mentions that the assesse once eligible for the deductions u/s 80IB  in the first year then he is eligible for the consecutive 9 years , no matter what is the condition of the company in those years.

Although the act of claim u/s 80IB by the assesse could be deemed as unethical when viewed logically but, with the judgment of the court this act is justified as legal and ethical in the eyes of judiciary of India.